The Prospect of the Boutique Hotels with Economic Changes in China

Running head: GENERAL ENVIRONMENTAL CHANGES1

The Prospect of the Boutique Hotels with

Economic Changes in China

Yinghe Liu

Arkansas State University

GENERAL ENVIRONMENTAL CHANGES 2

Abstract

This paper explores six published articles that report on

results from research conducted boutique hotels and

economic changes relationships. This paper depicts the


fact that domestic consumption drives economic growth in

China and figures out that such an economic trend lets

boutique hotels in China enjoy the high growth. As a

result, boutique hotels could take advantage of the trend

through a strong differentiation strategy, locations

decision, and the authenticity of the property, as well

as the greater attention to environmental sustainability

and incorporation of technology into the property.

Keywords: boutique hotel, economic changes, China


The Prospect of the Boutique Hotels with

Economic Changes in China

With the development economy in China, this paper

explores how the boutique hotels are being affected and

identifies what the boutique hotel could do to deal with

this trend.

Literature Review

From the strategic management perspective, general

environment which includes six categories influences a

lot on a firm’s strategies and performance. Meanwhile,

economic change is the only factor which affects all


industries all the time in large scale in today global

world. China’s economy experienced a hard time during the

global economic crisis that began in 2008, but finally

got through with the lead of the government.

From 2008 to 2011, China’s real GDP growth averaged

9.6%. However, the economy has shown signs of slowing in

recent years. Real GDP grew by 7.7% in both 2012 and

2013. Nowadays, China’s economy has transformed away from

an export-driven economy to a domestic-consumption-led

economy. This trend is expected to continue. Companies

are increasingly developing dispersed supply chains with


operations in China.

The dramatic change of urbanization in China should

also not be neglected. The Chinese government has a goal

of moving 1% of the population to cities each year, which

represents 13 million people per year moving from rural

to urban locations. At the same time, the country wants

to avoid urban sprawl. The goal is to create high-density

urban centers that are connected by a high-speed rail.

Under such good situation of developing, many

industries in China benefit from it. And guess which

industry would benefit the most? Well, rapid economic


growth and urbanization will drive the hotel market,

especially boutique hotels.

A review of literature on the definition of boutique

hotels reveals common dimensions among descriptions of

boutique properties. Main dimensions mentioned include

smaller non-chain upscale properties with a focus on the

exchange between guests and hotel employees. These

operations provide highly personalized service in a homey

and intimate environment that usually includes a unique

design or cultural component. Location of the property is

also integral to a hotel’s success and ability to deliver


a unique experience to guests (McIntosh & Siggs, 2005;

Aggett, 2007; Lim & Endean, 2007; van Hartesvelt, 2006;

Sarheim, 2010).

In the 1970’s, the development of large hotel chain

operations led to the rising popularity of standardizing

lodging products and services. The concept of boutique

hotels was the result of a counter movement against the

standardization of lodging products and services in the

1980s. This was used to express the visitors’ self-

concept of themselves or express their self-actualization

needs (Jamal & Goode, 2001). The counter movement


continued to fuel growth of the boutique subsector with

independent, dedicated boutique hotel chains and major

chain operators (Mintel, 2011). In comparison to other

lodging subsectors, boutique hotels are able to deliver

both aspects of design and local culture to guests;

hence, successfully attracting more guests and charging

higher room rates. As with many service based products, a

differentiation strategy is integral to setting an

organization apart, attracting guests and remaining

profitable in the long run (Taylor, 1996). With this

information, it is inferred that the boutique concept is


successful at differentiating itself from other lodging

products, while better addressing guest needs and

creating value for them. This is especially important of

boutique hotels whose ultimate goal is to go against

standards and be different.

This trend was expected to continue strong throughout

2007 and 2008 (Pricewaterhouse Cooper, 2006) However,

with the financial crisis, the forecasts did not

materialize. Deloitte noted boutique hotels yielded

weaker performance and slower growth through the

recessionary phase, pulling down the sector’s overall


performance averages (Deloitte, 2010).

Fuelled by forces from a spike in air travel to the

2008 Beijing Olympics and a shake-up in service styles,

the hotel sector is booming across China. Supply side

growth for boutique hotels is fuelled by outperformance

of the subsector compared to overall regional lodging

sector performance (Aggett, 2007; Mintel, 2011). W Hotels

currently have seventeen properties in Asia, four of

which are in China (Starwood Hotel & Resorts Worldwide

Inc., 2012). Hong Kong is typical in experiencing a

bumper year, with five-star occupancies averaging 84


percent, up 12 percent on 1997’s high. Shanghai also has

the same story because the influx of tourists in the run-

up to the 2010 Shanghai World Expo.

The history proved that the number of the boutique

hotels mainly fluctuates with the trend of the economy.

Even though the people’s self-actualization needs behind

the rise of the boutique hotels could be categorized

under the sociocultural factors. It is the rise of

economy which caused the people’s self-actualization

needs. As a result, it is definitely sure that the

economic trend would influence the boutique hotel market


in the same direction.

The Chinese government has acknowledged that its

current economic growth model needs to be altered and has

announced several initiatives to address various economic

challenges. In November 2013, the Communist Party of

China held the Third Plenum of its 18th Party Congress,

which issued a communique outlining a number of broad

policy statements on reforms that would be implemented by

2020. Many of the proposed reforms are measures that

would seek to boost competition and economic efficiency.

The implement of these comprehensive economic reforms


revealed some facts that more quickly hasten China’s

transition to a free market economy; rebalance the

Chinese economy by making consumer demand, rather than

exporting and fixed investment; boost productivity and

innovation; and enhance environmental protection. China’s

economy has an upward trend, and predictably, the

boutique hotels would enjoy a similar trend in China.

The time is right, and boutique hotels should take the

advantage of it. What they need to maintain and improve

is a differentiation strategy which was talked about in

the previous part, the location, the authenticity of the


property, along with greater attention to environmental

sustainability and incorporation of technology.

The location of a boutique hotel is part of the

product, service and experience delivered to a guest at a

boutique hotel. When people come to China, they want a

hotel that reflects the country and locality, something

the nimble boutiques can do very well. Culturally vibrant

areas, buildings with heritage or historical value, and

exotic resort destinations will become increasingly

scarce as the demand for this limited resources increases

every day. However, this is an opportunity in China.


China enjoys the advantage of history and geography,

different styles of culture could be added to various

boutique hotels in different regions.

Authenticity is another element that must be

maintained at all boutique hotels. In other words, the

property must fit in with the destination in which it is

located. For converted heritage and interesting

buildings, the integrity of the building should be kept

intact with minimal changes to the structural appearance

of the building such that the story of the property is

maintained.


Alike to other tourism and hospitality services,

boutique hotels have not escaped the pressure of becoming

more environmentally conscious. As mid-level to luxury

properties, it is important guests are not forced to

become environmentally conscious. Subtle ways of helping

guests to enforce a more environmentally friendly stay

includes smaller garbage cans and larger recycling bins,

or sourcing locally produced and in season ingredients

for on-site food and beverage operations (Boutique and

Lifestyle Lodging Association, 2010).

Presence of in-room technology is a must and continual


upgrades of the most up-to-date technologies will be

expected from guests. Operators will have to mind the

placement of technology in- room however, making sure

that they are not intrusive or jarring in the room,

particularly in a heritage building (Boutique and

Lifestyle Lodging Association, 2010).


Conclusions

In order to gain a complete understanding of boutique

hotels’ prospect in China, it is necessary to conduct a

study that examines all aspects of boutique hotels. In

conclusion, exponential growth of boutique hotels is

expected in China. What they need to maintain and improve

is a differentiation strategy, the location, the


authenticity of the property, along with greater

attention to environmental sustainability and

incorporation of technology.

References


Clarissa Chan. (2012). Lodging subsector report: boutique

hotels International Tourism Marketing and Development

Dr. Jonathon Day (2012). Boutique and lifestyle Hotels:

Emerging Definitions Boutique & Lifestyle Lodging Association

Professor Ron Adner Lifestyles of the Rich and Almost

Famous: The Boutique Hotel Phenomenon in the United

States High Tech Entrepreneurship and Strategy Group Project

Wayne M. Morrison (2014) China’s Economic Rise: History,

Trends, Challenges, and Implications for the United

States Congressional Research Service

William C. Kirby (2009) China in the Global Economy Global

Business Summit

Evelyn Omanukwue CUSTOMER PERCEPTION OF SERVICE QUALITY IN

BOUTIQUE HOTEL LE SIX PARIS

Keith Barr The China Opportunity Hotel Indigo, Shanghai on the Bund

The Prospect of the Boutique Hotels with Economic Changes in China

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